Health Care Plans

A new survey from the National Business Group on Health found that 55 percent of large employers support a Medicare expansion that's limited to older Americans. In this article from Employee Benefit Advisor, Nison discusses the potential benefits and downfalls of an expansion to Medicare.

Like a significant chunk of American voters, a majority of large employers want to expand Medicare. Just not too much.

A new survey of 147 large employers from the National Business Group on Health found that 55% of them support a Medicare expansion that’s limited to older Americans. Only 23% think eligibility should drop to age 50, however, and 45% don’t think it should expand at all. A majority believe that a broader “Medicare for All” plan would increase health costs.

The same survey also highlights why employers should consider coming around on health reform that reduces their role in the system. The growth in health costs has outpaced inflation and wage growth for years, and the surveyed businesses expect it to rise 5% to $15,375 for each employee next year.

About 70% of those costs will fall on the companies, which plan to try everything from boosting virtual health services to investing in health concierges to rein them in, according to the survey.

History suggests that their best efforts might not amount to much.

Employer-sponsored insurance is America’s single largest source of health coverage. That’s mostly true because the IRS exempted employer health benefits from taxes in 1943, a move that created the federal government’s single biggest tax expenditure. Large companies derive some benefit from the current system because they can provide a significant tax-free benefit that helps them compete for talent and pay people less. But it comes with significant drawbacks. Employers have to devote substantial resources to providing healthcare and controlling costs. Many of them have no particular expertise or advantage in doing so.

The results are mixed. Yes, individuals with private insurance are generally satisfied with the quality of their coverage. They’re not nearly as happy about the cost as deductibles rise. The U.S. pays more than any other developed country for healthcare and medicines and receives worse results on a variety of metrics.

Employers pay particularly high prices and spend heavily on plans that have higher overhead than public alternatives. A recent RAND study found that employer-sponsored plans paid hospitals at 241% of Medicare rates in 2017. Employers are already effectively subsidizing public programs, not to mention the profitability of insurers, health care providers and drugmakers.

It’s not entirely their fault. The American system inherently fragments negotiating power, which gives providers a significant advantage and makes it difficult for even the largest employers to get a good deal. Turning a larger piece of healthcare over to the government would free companies to focus more time and resources on their actual business instead of on navigating the world’s most expensive and convoluted healthcare market.

Big businesses most likely fear big Medicare expansion in large part because it would lead to a significant tax increase. But looking at any tax increase as an enemy is a mistake. Those taxes represent a trade-off; they would replace some or all of the billions of dollars that employers are currently spending on care. Depending on what taxes are imposed and whether the public plan is able to control costs better than the current system — and it could hardly do worse — many employers could come out ahead.

There are a lot of unknowns when it comes to Medicare for All and plans that move the country in that direction. Employers are right to be skeptical until they know more, but the results could well shake out in their favor, and they shouldn’t be so quick to discount the approach.

Did you know: Eighteen percent of employers provide health-related genetic testing benefits, according to new statistics from the Society of Human Resource Management (SHRM). Read on for what employers should consider before adding a genetic testing benefit to their benefits package.

As employers look for new voluntary benefits to help attract and retain employees, a growing number are turning to direct-to-consumer genetic testing for all employees to their benefits plans. According to the latest statistics from the Society for Human Resource Management, 18% of employers provide a health-related genetic testing benefit, an increase of 6% over the previous year.

For the most part, it can be a smart move: Not only can the benefit differentiate one employer from others vying to hire from the same employee pool, genetic testing providers market the benefit as a way to potentially lower healthcare costs and increase employee wellness.

This type of testing can be valuable for employees at an increased risk for certain types of cancer, such as breast and ovarian cancer related to mutations of the BRCA1 and BRCA2 genes, those considering having a child who have risk factors for genetic conditions such as cystic fibrosis and Tay Sachs disease, those who have a family history of conditions like high cholesterol, and those who take medications such as blood thinners and anti-depressants. There also are tests that look for genes associated with conditions such as Parkinson’s disease, Alzheimer’s disease and celiac disease.

But employers also have to realize that genetic testing for all employees, regardless of family history and risk factors, comes with potential downsides. In fact, some physicians believe that widespread genetic testing of this type may even present a risk of harm. There’s also the issue of regulation and oversight of direct-to-consumer genetic testing. The industry is not currently regulated, which, some researchers have found, can lead to inaccurate or varying results. One study found that when the same genetic variant was provided to nine different labs for analysis, the answers provided were different 22% of the time, highlighting the risk of false positive and false negative results.

So for employers who offer — or are considering adding — a genetic benefit, make sure to think about the potential outcomes that can occur by doing so.

The potential for lower costs as well as unnecessary healthcare spending

If an employee’s genetic test is positive for a mutation that’s associated with cancer or another disease, he or she may be more proactive about screening for the disease and may make lifestyle changes that may lower the risk of developing the disease. There are potential healthcare cost savings to early detection of some conditions. For example, by some estimates, the cost for treating early-stage breast cancer is more than 50% less than the cost to treat the same cancer at an advanced stage.

For employees who undergo testing related to how effective a blood thinner or antidepressant will be, there can be better health outcomes as well as cost savings. One study found that when physicians prescribed the blood thinner Warfarin based on pharmacogenomic testing, adverse events decreased by 27%. Avoiding adverse events and making sure employees are taking the medications that can most effectively treat their conditions can help keep them healthy, out of the hospital and productively on the job, all of which has a positive financial impact.

But when you’re screening people who don’t have risk factors or a family history of these conditions, a positive test result can lead to unnecessary testing and medical procedures, potential complications from those procedures and the costs associated with that testing and care.

Before and after testing, education

Employers who offer genetic testing without a physician referral need to take steps to ensure that employees understand the risks and benefits of these tests upfront and that they know what a genetic test can and cannot tell them about their health now and in the future. The first step is for any employer offering genetic testing to provide education for employees.

Many employees don’t realize that having a gene mutation that’s associated with a disease does not mean that he or she will ever develop that disease. The risk associated with most genetic variations is, in fact, relatively small. Because of that misunderstanding, employees may experience needless worry or, if the test is negative for mutations related to a disease, may forgo screenings like mammograms, colonoscopies and cholesterol tests that can help detect health problems earlier when they are often more treatable. In the case of genetic testing for mutations associated with cancer, employees may not be aware that most cancers are not caused by a mutation in the single gene that the test screens for.

For some of the conditions that genetic tests screen for, like Alzheimer’s disease, there are currently no treatments. This can again cause anxiety for employees and their families. Genetic tests also have implications that reach beyond the specific employee who is tested. A positive test can affect siblings and children as well, opening the question of whether the employee wants or feels compelled to share the results with other family members who may also be at risk.

Employers who offer employees genetic testing should ensure that all employees who choose to undergo testing are guided by experienced genetic counselors who can help them interpret and understand the results of their test and can connect them with other healthcare providers for additional testing or treatment as needed.

An informational letter was recently released by the Internal Revenue Service (IRS) clarifying that IRS Notice 2008-59 was not intended to provide an exclusive set of circumstances in which employers could recoup contributions made to employee HSAs. Continue reading this blog post from UBA to learn more.

Generally, a person’s interest in a Health Savings Account (HSA) is nonforfeitable. However, in the past, the Internal Revenue Service’s Notice 2008-59 described limited circumstances under which an employer may recoup contributions made to an employee’s HSA.

The Internal Revenue Service (IRS) recently released Information Letter 2019-0033 (Letter), clarifying that IRS Notice 2008-59 was not intended to provide an exclusive set of circumstances in which an employer can recoup contributions made to an HSA. If there is clear evidence of an administrative or process error, an employer may request that the contributions it made to an employee’s HSA be returned. This correction should put the employer and employee in the same position that they would have been in if the error had not occurred.

The Letter lists the following examples of when an employer may recoup HSA contributions:

An amount withheld and deposited in an employee’s HSA for a pay period is greater than the amount shown on the employee’s HSA salary reduction election.

An employee receives an employer contribution that the employer did not intend to contribute but the amount was transmitted because an incorrect spreadsheet is accessed or because employees with similar names are confused with each other.

An employee receives an incorrect HSA contribution because it is incorrectly entered by a payroll administrator (whether in-house or third-party) causing the incorrect amount to be withheld and contributed.

An employee receives a second HSA contribution because duplicate payroll files are transmitted.

An employee receives as an incorrect HSA contribution because a change in employee payroll elections is not processed timely so that amounts withheld and contributed are greater than (or less than) the employee elected.

An employee receives an incorrect HSA contribution because an HSA contribution amount is calculated incorrectly, such as a case in which an employee elects a total amount for the year that is allocated by the system over an incorrect number of pay periods.

An employee receives an incorrect HSA contribution because the decimal position is set incorrectly resulting in a contribution greater than intended.

Compliance Recap – 2018 Year in Review

During 2018, federal agencies and courts provided employers with a significant amount of new guidance, regulation, and FAQs relating to employer benefit plans. This month-by-month guide provides a timeline of these documents, highlighting the major changes and updates in 2018.

January 2018

January was a busy month in the employee benefits world. On January 24, 2018, the U.S. Senate confirmed Alex Azar as the new Secretary of the U.S. Department of Health and Human Services (HHS).

HHS released the 2018 federal poverty guidelines. The DOL issued updated civil monetary penalties for 2018 and announced the applicability date for final regulations regarding disability claims procedures.

Congress and the President delayed the Cadillac tax’s effective date, delayed the health insurance tax (HIT), and reauthorized the Children’s Health Insurance Program.

HHS Releases 2018 Federal Poverty Guidelines

The U.S. Department of Health and Human Services (HHS) released the 2018 federal poverty guidelines (FPL). For a family/household of one in the contiguous United States, the FPL is $12,140. In Alaska, the FPL is $15,180, and in Hawaii, the FPL is $13,960.

For 2018, applicable large employers that wish to use the FPL affordability safe harbor under the employer shared responsibility / play-or-pay rules should ensure that their lowest employee-only premium is equal to or less than $96.72 a month, which is 9.56% of the 2018 FPL.

Civil Monetary Penalties Inflation Adjustment for 2018

The U.S. Department of Labor (DOL) published its civil monetary penalties for 2018. Under federal law, the DOL is required to annually adjust its regulations’ civil monetary penalties for inflation no later than January 15 of each year. The adjusted penalty amounts are effective for violations occurring after November 2, 2015, that have penalties assessed after January 2, 2018.

Below are some examples of the increases.

Description

2017 Penalty Amount

2018 Penalty Amount

Failure to file Form 5500

$2,097 per day

$2,140 per day

Failure to provide the Summary of Benefits and Coverage (SBC)

$1,105

$1,128

Failure to provide documents requested by the DOL

$149 per day, not to exceed $1,496 per request

$152 per day, not to exceed $1,527 per request

Failure to inform employees of children’s health insurance program (CHIP) coverage opportunities; each employee is a separate violation

The U.S. Department of Labor (DOL) announced that April 1, 2018, will be the applicability date for its rule that amends the claims procedure requirements of ERISA-covered employee benefit plans that provide disability benefits. The DOL’s Fact Sheet contains a summary of the regulation’s requirements.

Congress and the President passed H.R. 195, a short-term spending bill. The bill delays the effective date of the excise tax on high cost employer-sponsored health coverage (“Cadillac tax”) to 2022. The bill delays the health insurance tax (HIT) that applies to insurers. The HIT was in effect in 2014, 2015, and 2016, and will be in effect for 2018. Now the HIT will be delayed from 2019 to 2020; essentially, the bill implemented a one-year moratorium for the HIT for 2019. The bill also reauthorizes the Children’s Health Insurance Program (CHIP) for six years.

February 2018

Coming off a busy January, the Internal Revenue Service (IRS) updated its Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C, its Questions and Answers on Information Reporting by Health Coverage Providers, and its Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act.

The IRS released its adjusted penalty amounts under the employer shared responsibility provisions for the 2018 calendar year.

For reporting in 2018 (for offers of coverage and coverage in 2017), an applicable large employer must furnish Form 1095-C to each full-time employee on or before March 2, 2018. This due date reflects a 30-day extension from the general due date (that is, January 31 of the year immediately following the calendar year to which the information relates); the extension was provided by the IRS in Notice 2018-06 on December 22, 2017. The extension applies automatically and does not require the submission of any request or other documentation to the IRS.

Although the IRS extended the due date for furnishing Form 1095-C for 2017, the due date for filing Forms 1094-C and 1095-C with the IRS was not extended.

The Internal Revenue Service (IRS) updated its Questions and Answers on Information Reporting by Health Coverage Providers (Section 6055) by adding questions 30 through 35. Among other items, the IRS discussed short-term relief available from penalties for incomplete or incorrect returns filed with the IRS or furnished to individuals. For reporting in 2016, 2017, and 2018, the IRS will not impose penalties on employers that can show that they have made good faith efforts to comply with the information reporting requirements.

March 2018

March was a quiet month in the employee benefits world. The U.S. Department of Labor (DOL) updated its model Premium Assistance Under Medicaid and the Children’s Health Insurance Program notice (CHIP notice).

The IRS issued its updated Employer’s Tax Guide to Fringe Benefits, issued transition relief regarding HSA eligibility of individuals with health insurance that provides benefits for male sterilization or male contraceptives without a deductible, and issued its updated Guide on Health Savings Accounts and Other Tax-Favored Health Plans.

DOL Updates Employer CHIP Notice

Employers that provide health insurance coverage in states with premium assistance through Medicaid or the Children’s Health Insurance Program (CHIP) must provide their employees with the CHIP notice before the start of each plan year. The CHIP notice provides information to employees on how to apply for premium assistance, including how to contact their state Medicaid or CHIP office. The DOL usually updates its model CHIP notice biannually.

IRS Issues Updated Employer’s Tax Guide to Fringe Benefits

The Internal Revenue Service (IRS) issued its 2018 Publication 15-B which contains information for employers on the employment tax treatment of fringe benefits. The guide is updated to reflect, among other items:

The suspension of qualified bicycle commuting reimbursements from an employee’s income for any tax year beginning after December 31, 2017, and before January 1, 2026.

The suspension of the exclusion for qualified moving expense reimbursements from an employee’s income for tax years beginning after December 1, 2017, and before January 1, 2026. However, the exclusion remains available for a U.S. Armed Forces member on active duty who moves because of a permanent change of station.

Limits on the deduction by employers for certain fringe benefits, such as meals and transportation commuting benefits.

The definition of items that aren’t tangible personal property for purposes of employee achievement awards.

The guide lists fringe benefits’ tax treatment in its Table 2-1 “Special Rules for Various Types of Fringe Benefits.”

Recently, some states adopted laws that require certain health insurance policies to provide benefits for male sterilization and male contraceptives without cost-sharing.

However, under health saving account (HSA) eligibility requirements, a high deductible health plan (HDHP) generally may not provide benefits for any year until the minimum deductible for that year is satisfied. Although an HDHP may provide preventive care without a deductible or with a deductible that is below the minimum annual amount required by HSA eligibility requirements, male sterilization and male contraceptives are not considered preventive care under the Social Security Act or any Treasury Department guidance.

The Internal Revenue Service (IRS) released its Notice 2018-12 (Notice) to clarify that if a health plan provides benefits for male sterilization or male contraceptives before satisfying the minimum deductible for an HDHP, then the plan is not an HDHP, regardless of whether state law requires coverage of such benefits. Further, an individual who is not covered by an HDHP with respect to a month is not an HSA-eligible individual and may not deduct contributions to an HSA for that month. Similarly, HSA contributions made by an employer on behalf of the individual are not excludible from income and wages.

To allow states time to change their laws so their residents will be able to purchase health insurance coverage that qualifies as an HDHP, the Notice provides transition relief for periods before 2020 to individuals who are, have been, or become participants in or beneficiaries of a health insurance policy that provides benefits for male sterilization or male contraceptives without a deductible or with a deductible below the minimum deductible for an HDHP.

During the transition relief period, an individual with this type of health insurance policy will not be treated as HSA-ineligible, merely because the policy fails to qualify as an HDHP.

April 2018

April was a busy month in the employee benefits world. The Internal Revenue Service (IRS) modified the 2018 health savings account (HSA) family contribution limit back to $6,900. The U.S. Department of Labor (DOL), U.S. Department of Health and Human Services (HHS), and the Treasury released proposed frequently asked questions regarding mental health parity.

The Centers for Medicare and Medicaid Services (CMS) released the 2019 parameters for the Medicare Part D prescription drug benefit, a 2019 Benefit and Payment Parameters final rule, and a transitional policy extension for non-grandfathered coverage in the small group and individual health insurance markets.

The IRS released frequently asked questions on the employer credit for paid family medical leave.

IRS Changes 2018 HSA Family Contribution Limit

The Internal Revenue Service (IRS) recently released Revenue Procedure 2018-27 to modify the 2018 health savings account (HSA) family contribution limit back to $6,900. This is the second, and likely final, change in limit during 2018.

As background, in May 2017, the IRS released Revenue Procedure 2017-37 that set the 2018 HSA family contribution limit at $6,900.

However, in March 2018, the IRS released Revenue Procedure 2018-10 that adjusted the annual inflation factor for some tax-related formulas from the Consumer Price Index (CPI) to a new factor called a “chained CPI.” As a result, the 2018 HSA family contribution limit was lowered to $6,850 from $6,900, retroactively effective to January 1, 2018.

Stakeholders informed the IRS that the lower HSA contribution limit would impose many unanticipated administrative and financial burdens. In response and in the best interest of sound and efficient tax administration, the IRS will allow taxpayers to treat the originally published $6,900 limit as the 2018 HSA family contribution limit.

Excess Contribution Tax Treatment if Employee Received Distribution Based on Earlier Limit

Excess contribution is includible in the employee’s gross income and subject to the 20% excess contributions excise tax?

Yes

Yes

No

Yes

No

Generally, no.

Yes, if the HSA distribution is attributable to employer contributions and not included in the employee’s wages because the employer treats $6,900 as the limit, unless the employee uses the distribution for qualified medical expenses.

The Departments respond to FAQs as part of implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

Generally, the MHPAEA requires that the financial requirements (for example, coinsurance and copays) and treatment limitations (for example, visit limits) imposed on mental health or substance abuse disorder (MH/SUD) benefits cannot be more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical/surgical benefits in a class.

Similarly, a group health plan or issuer cannot impose a nonquantitative treatment limitation (NQTL) on MH/SUD benefits that is more stringent than a comparable limitation that is applied to medical/surgical benefits.

The MHPAEA regulations include express disclosure requirements. For example, if a participant requests the criteria for medical necessity determinations regarding MH/SUD benefits, then the plan administrator must make the information available to the participant.

The Centers for Medicare and Medicaid Services (CMS) released the following parameters for the defined standard Medicare Part D prescription drug benefit for 2019:

Deductible

$ 415

Initial coverage limit

$ 3,820

Out-of-pocket threshold

$ 5,100

Total covered Part D spending at the out-of-pocket threshold (for beneficiaries who are ineligible for the coverage gap discount program)

$ 8,139.54

Minimum cost-sharing in catastrophic coverage portion of the benefit

$ 3.40 for generic/preferred multi-source drugs

$ 8.50 for all other drugs

Generally, group health plan sponsors must disclose to Part D eligibility individuals whether the prescription drug coverage offered by the employer is creditable. Coverage is creditable if it, on average, pays out at least as much as coverage available through the defined standard Medicare Part D prescription drug plan.

CMS Issues 2019 Benefit and Payment Parameters Final Rule

The Centers for Medicare and Medicaid Services (CMS) published its 2019 Benefit and Payment Parameters final rule. The rule primarily affects the individual health insurance market inside and outside of the Exchange, the small group health insurance market, issuers, and the states.

Within the rule, three items most directly affect employers and their group health plans:

Maximum annual out-of-pocket limit on cost sharing for 2019

New methods for changing state EHB-benchmark plans

New requirements for employers and issuers participating in the Small Business Health Options Program (SHOP) Marketplace

CMS Issues Transitional Policy Extension

The Centers for Medicare and Medicaid Services (CMS) issued a bulletin extending its transitional policy.

As background, in November 2013, CMS announced a transitional policy for non-grandfathered coverage in the small group and individual health insurance markets. Under its policy, health insurance issuers may choose to continue certain coverage that would otherwise be cancelled because of noncompliance with Patient Protection and Affordable Care Act (ACA) and Public Health Service Act (PHS Act). Further, affected small businesses and individuals may choose to re-enroll in such coverage.

Under its policy, non-grandfathered health insurance coverage in the small group and individual health insurance markets will not be considered to be out of compliance with the following ACA and PHS Act market reforms if certain criteria are met:

Fair health insurance premiums

Guaranteed availability of coverage

Guaranteed renewability of coverage

Prohibition of pre-existing condition exclusions or other discrimination based on health status, with respect to adults, except with respect to group coverage

Prohibition of discrimination against individual participants and beneficiaries based on health status, except with respect to group coverage

Non-discrimination in health care

Coverage for individuals participating in approved clinical trials

Single risk pool requirement

Under CMS’ transitional policy, states may permit issuers that have renewed policies under the transitional policy continually since 2014 to renew such coverage for a policy year starting on or before October 1, 2019. However, any policies renewed under this transitional policy must not extend past December 31, 2019.

IRS Releases FAQ on Employer Credit for Paid Family Medical Leave

The IRS released an FAQ that primarily reiterates the Tax Cuts an Jobs Act’s provisions that provide a new federal credit for employers that provide paid family and medical leave to their employees.

The IRS explains that an employer must reduce its deduction for wages or salaries paid or incurred by the amount determined as a credit. Also, any wages taken into account in determining any other general business credit may not be used in determining this credit.

The IRS adds this definition of “paid family and medical leave” that, for purposes of the credit, includes time off for:

Birth of an employee’s child and to care for the child.

Placement of a child with the employee for adoption or foster care

To care for the employee’s spouse, child, or parent who has a serious health condition

A serious health condition that makes the employee unable to perform the functions of his or her position

Any qualifying exigency due to an employee’s spouse, child, or parent being on covered active duty (or having been notified of an impending call or order to covered active duty) in the Armed Forces.

To care for a service member who is the employee’s spouse, child, parent, or next of kin

The FAQ also explains that, in the future, the IRS intends to address:

When the written policy must be in place

How paid “family and medical leave” relates to an employer’s other paid leave

How to determine whether an employee has been employed for “one year or more”

The impact of state and local leave requirements

Whether members of a controlled group of corporations and businesses under common control are treated as a single taxpayer in determining the credit

May 2018

May was a relatively busy month in the employee benefits world. The Internal Revenue Service (IRS) released the indexed threshold that employers will use in 2019 to determine coverage affordability. The IRS also issued inflation-adjusted amounts that will apply to health savings accounts for 2019.

The IRS released guidance on its play-or-pay penalty response acknowledgment letters. The IRS also released a tax reform tip, frequently asked questions about the family and medical leave credit, and a fact sheet on determining whether an employer is a large employer.

IRS Releases ACA Indexed Affordability Threshold for 2019

The Internal Revenue Service (IRS) released its Revenue Procedure 2018-34 that makes an indexing adjustment to the required contribution percentage that is used to determine whether employer-sponsored health coverage is affordable. For 2019, the percentage will be 9.86 percent.

This means that if an employer is using the federal poverty level (FPL) affordability safe harbor, then the maximum monthly self-only contribution will be $99.75. [9.86% of $12,140 (the 2018 contiguous U.S. FPL for one person), divided by 12, equals $99.75.]

IRS Releases 2019 Limits on Health Savings Accounts

The Internal Revenue Service (IRS) released its Revenue Procedure 2018-30 that provides the 2019 inflation-adjusted amounts for health savings accounts (HSAs).

For 2019, the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,500. For 2019, the annual limitation on deductions for an individual with family coverage under a high deductible health plan is $7,000.

For 2019, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,750 for self-only coverage or $13,500 for family coverage.

In late 2017, the Internal Revenue Service (IRS) started mailing Letter 226J to inform large employers of their potential liability for an employer shared responsibility payment (ESRP) for the 2015 calendar year. The IRS’ determination of an employer’s liability and potential payment is based on information reported to the IRS on Forms 1094-C and 1095-C and information about the employer’s full-time employees that were allowed the premium tax credit.

The letter contains Form 14764 (ESRP Response) which is the form that the employer must use to file its response by the deadline listed in the letter. The employer uses Form 14764 to indicate that it agrees or disagrees with the IRS’ letter. If an employer disagrees with the proposed liability, then it must provide a full explanation of its disagreement using Form 14765.

The IRS will acknowledge the employer’s response with a Letter 227 that describes the further actions that an employer can take. The IRS’ recently released Understanding Your Letter 227 describes the versions of Letter 227 that an employer may receive:

Letter 227-J acknowledges receipt of the signed agreement Form 14764, ESRP Response, and that the penalty will be assessed. After the IRS issues this letter, the case will be closed. No response is required.

Letter 227-Kacknowledges receipt of the information provided and shows the penalty has been reduced to zero. After the IRS issues this letter, the case will be closed. No response is required.

Letter 227-L acknowledges receipt of the information provided and shows the penalty has been revised. The letter includes an updated Form 14765 and revised calculation table. The employer can agree or request a meeting with the manager and/or appeals.

Letter 227-M acknowledges receipt of information provided and shows that the penalty did not change. The letter provides an updated Form 14765 and revised calculation table. The employer can agree or request a meeting with the manager and/or appeals.

Letter 227-Nacknowledges the decision reached in appeals and shows the penalty based on the appeals review. After the IRS issues this letter, the case will be closed. No response is required.

If, after receiving Letter 227, the employer agrees with the proposed penalty, then the employer would follow the instructions to sign the response form and return it with full payment in the envelope provided.

If, after receiving Letter 227, the employer disagrees with the proposed or revised shared employer responsibility payment, the employer must provide an explanation of why it disagrees or indicate changes needed, or both, on Form 14765. Then the employer must return all documents as instructed in the letter by the response date. The employer may also request a pre-assessment conference with the IRS Office of Appeals within the response date listed within Letter 227, which will be generally 30 days from the date of the letter.

If the employer does not respond to either Letter 226J or Letter 227, the IRS will assess the amount of the proposed employer shared responsibility payment and issue a notice and demand for payment.

In its Tax Tip, the IRS explains that an employer must reduce its deduction for wages or salaries paid or incurred by the amount determined as a credit. Also, any wages taken into account in determining any other general business credit may not be used in determining this credit.

In its FAQs, the IRS indicates that, in the future, it will address when the written policy must be in place, how paid family and medical leave relates to an employer’s other paid leave, how to determine whether an employee has been employed for one year or more, the impact of state and local leave requirements, and whether members of a controlled group of corporations and businesses under common control are treated as a single taxpayer in determining the credit.

Although this one-page fact sheet doesn’t provide new information about counting employees, it may be a helpful guide for those employers who have fewer than 50 full-time or full-time equivalent employees and who are growing their staff numbers.

June 2018

June was a relatively quiet month in the employee benefits world. The U.S. Department of Labor issued final regulations regarding association health plans. The Centers for Medicare and Medicaid Services released a form that certain plan sponsors will use for reporting limited wraparound coverage.

DOL Issues Final Regulations Regarding Association Health Plans

On June 19, 2018, the U.S. Department of Labor (DOL) published Frequently Asked Questions About Association Health Plans (AHPs) and issued a final rule that broadens the definition of “employer” and the provisions under which an employer group or association may be treated as an “employer” sponsor of a single multiple-employer employee welfare benefit plan and group health plan under Title I of the Employee Retirement Income Security Act (ERISA).

The final rule is intended to facilitate adoption and administration of AHPs and expand health coverage access to employees of small employers and certain self-employed individuals.

The final rule will be effective on August 20, 2018. The final rule will apply to fully-insured AHPs on September 1, 2018, to existing self-insured AHPs on January 1, 2019, and to new self-insured AHPs formed under this final rule on April 1, 2019.

CMS Releases Form for Reporting Wraparound Excepted Benefits

Under a 2015 final rule by the Internal Revenue Service, U.S. Department of Labor, and U.S. Department of Health and Human Services, certain employers may offer limited wraparound coverage under one of two narrow pilot programs.

These wraparound benefits are considered an excepted benefit and are generally exempt from certain requirements of federal laws, including ERISA, the Internal Revenue Code, and parts of the Patient Protection and Affordable Care Act.

Under the final rule, plan sponsors who offer limited wraparound coverage have reporting requirements. In December 2017, the Centers for Medicare and Medicaid Services (CMS) issued a notice for comments on a proposed reporting form.

On June 25, 2018, the CMS published its Reporting Form for Plan Sponsors Offering Limited Wraparound Coverage. A plan sponsor of limited wraparound coverage must file the form once, within 60 days of the form’s publication (by August 24, 2018), or 60 days after the first day of the first plan year that limited wraparound coverage is first offered.

July 2018

July was a quiet month in the employee benefits world. The IRS released an information letter on the employer shared responsibility provisions.

IRS Releases Information Letter on Employer Shared Responsibility

The Internal Revenue Service (IRS) released its Information Letter 2018-0013 to reiterate how the employer shared responsibility provisions would apply to an applicable large employer. Specifically, the IRS explained how the Service Contract Act (SCA) interacts with the Patient Protection and Affordable Care Act (ACA).

As background, the SCA requires workers who are employed on certain federal contracts to be paid prevailing wages and fringe benefits. An employer generally can satisfy its fringe benefit obligation by providing the cash equivalent of benefits or a combination of cash and benefits. Alternatively, an employer may permit employees to choose among various benefits, or various benefits and cash. An employer may choose to provide fringe benefits under the SCA by offering an employee the option to enroll in health coverage provided by the employer (including an option to decline that coverage). If the employee declines the coverage, that employer would then generally be required by the SCA to provide the employee with cash or other benefits of an equivalent value.

This Information Letter refers to IRS Notice 2015-87 which describes how the ACA and the SCA may be coordinated for plan years beginning before January 1, 2017, and until further guidance is issued and applicable. Notice 2015-87 clarifies that, for employees under the SCA, the choice of a cash-out payment will generally not require an employer to pay a greater share of the cost of the health coverage for the coverage to be considered affordable.

August 2018

August was a relatively quiet month in the employee benefits world. The Internal Revenue Service (IRS), the Department of Health and Human Services (HHS), and the Department of Labor (DOL) published a final rule that amends the definition of short-term, limited-duration insurance. HHS also released a fact sheet on the final rule. To provide guidance on association health plans, the DOL posted a fact sheet and the IRS posted a new Q&A for employers.

On August 3, 2018, the Internal Revenue Service, the Department of Health and Human Services (HHS), and the Department of Labor (collectively, the Departments) published a final rule that amends the definition of short-term, limited-duration insurance. HHS also released a fact sheet on the final rule.

According to the Departments, the final rule will provide consumers with more affordable options for health coverage because they may buy short-term, limited-duration insurance policies that are less than 12 months in length and may be renewed for up to 36 months.

The final rule will apply to insurance policies sold on or after October 2, 2018.

An employer that is not an applicable large employer (ALE) under the employer shared responsibility provisions does not become an ALE due to participation in an AHP.

An employer that is an ALE under the employer shared responsibility provisions continues to be an ALE subject to the employer shared responsibility provisions regardless of its participation in an AHP.

The only circumstance when multiple employers are treated as a single employer for determining whether the employer is an ALE is if the employers have a certain level of common or related ownership.

September 2018

September was another relatively quiet month in the employee benefits world. The IRS issued guidance on the employer credit for paid family and medical leave.

IRS Issues Guidance on Employer Credit for Paid Family and Medical Leave

The Internal Revenue Service (IRS) released Notice 2018-71 (Notice) that provides Q&A guidance on the Internal Revenue Code Section 45S employer credit for paid family and medical leave (FML). The IRS clarified several items in its guidance, including:

An employer does not need to be subject to Title I of the Family and Medical Leave Act of 1993 (FMLA) to be eligible for the employer credit for FML

A description of what the employer’s written policy must contain, including sample “non-interference” language

Under Section 45S, paid leave is considered FML only if the leave is specifically designated for one or more FMLA purposes, may not be used for any other reason, and is not paid by a state or local government or required by state or local law

An employee does not need to work a minimum number of hours per year to be a qualifying employee

Each member of a controlled group generally makes a separate election of whether to claim the credit

An employer must file IRS Form 8994, Employer Credit for Paid Family and Medical Leave, and IRS Form 3800, General Business Credit, with its tax return to claim the credit

October 2018

October was a busy month in the employee benefits world. The Internal Revenue Service (IRS) released final forms and instructions for 2018 ACA reporting. The Department of Health and Human Services (HHS) released inflation-adjusted civil monetary penalty amounts.

Congress and the President enacted a law to prohibit pharmacy gag clauses. The IRS provided tax relief to victims of Hurricane Michael in Florida. The DOL released FAQs for plan participants affected by Hurricanes Florence and Michael.

IRS Releases Final Forms and Instructions for 2018 ACA Reporting

The Internal Revenue Service (IRS) released instructions for both the Forms 1094-B and 1095-B and the Forms 1094-C and 1095-C and Forms 1094-B, 1095-B, 1094-C, and 1095-C. There are no substantive changes in the forms or instructions between 2017 and 2018, beyond the further removal of now-expired forms of transition relief. There is a minor formatting change to Forms 1095-B and 1095-C for 2018. There are dividers for the entry of an individual’s first name, middle name, and last name.

Reporting will be due early in 2019, based on coverage in 2018. For calendar year 2018, Forms 1094-C, 1095-C, 1094-B, and 1095-B must be filed by February 28, 2019, or April 1, 2019, if filing electronically. Statements to employees must be furnished by January 31, 2019.

All reporting will be for the 2018 calendar year, even for non-calendar year plans.

HHS Releases Inflation-Adjusted Federal Civil Penalty Amounts

For failure to provide information identifying situations where the group health plan is primary, the maximum penalty increases from $1,157 to $1,181 per failure.

For an employer who offers incentives to a Medicare-eligible individual to not enroll in employer-sponsored group health that would otherwise be primary, the maximum penalty increases from $9,054 to $9,239.

For willful or repeated failure to provide requested information regarding group health plan coverage, the maximum penalty increases from $1,474 to $1,504.

Summary of Benefits and Coverage: For failure to provide, the maximum penalty increases from $1,105 to $1,128 per failure.

Health Insurance Portability and Accountability Act (HIPAA):

Tier

Penalty

1. Did Not Know:

Covered entity or business associate did not know (and by exercising reasonable diligence would not have known) that it violated the provision of the Administrative Simplification regulations.

$114 to $57,051 for each violation, up to a maximum of $1,711,533 for identical provisions during a calendar year.

2. Reasonable Cause:

The violation was due to reasonable cause and not to willful neglect.

$1,141 to $57,051 for each violation, up to a maximum of $1,711,533 for identical provisions during a calendar year.

3. Willful Neglect – Corrected:

The violation was due to willful neglect, but the violation is corrected during the 30-day period beginning on the first date the liable person knew (or by exercising reasonable diligence would have known) of the failure to comply.

$11,410 to $57,051 for each violation, up to a maximum of $1,711,533 for identical provisions during a calendar year.

4. Willful Neglect – Not Corrected:

The violation was due to willful neglect and the violation is not corrected as described in Tier 3.

$57,051 minimum for each violation, up to a maximum of $1,711,533 for identical provisions during a calendar year.

The adjustments are effective for penalties assessed on or after October 11, 2018, for violations occurring after November 2, 2015.

Congress and the President Enact Law Prohibiting Pharmacy Gag Clauses

Congress and the President enacted the Patient Right to Know Drug Prices Act (Act) that prohibits any restriction on a pharmacy’s ability to inform customers about certain prescription drug costs.

The Act prohibits a group health plan (or a health insurance issuer offering group or individual health insurance coverage, or a pharmacy benefits management service working with a health plan or health insurance issuer) from taking the following actions against a pharmacy that dispenses a prescription drug to an enrollee in the plan or coverage:

restricting, directly or indirectly, the pharmacy from informing an enrollee of any difference between the enrollee’s out-of-pocket prescription drug cost under the plan or coverage and the amount that the enrollee would pay for the prescription drug without using any health plan or insurance coverage, or

penalizing the pharmacy for informing an enrollee of any difference between the enrollee’s out-of-pocket prescription drug cost under the plan or coverage and the amount that the enrollee would pay for the prescription drug without using any health plan or insurance coverage.

Tax Relief for Victims of Hurricane Michael in Florida

Victims of Hurricane Michael that took place beginning on October 7, 2018, in Florida may qualify for tax relief from the Internal Revenue Service (IRS). The President declared that a major disaster exists in Florida. The Federal Emergency Management Agency’s major declaration permits the IRS to postpone deadlines for taxpayers who have a business in certain counties within the disaster area.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866-562-5227 to request this tax relief.

In the prior month, the IRS extended deadlines for victims of Hurricane Florence in certain counties of North Carolina, South Carolina, and Virginia.

Whether an employee will still be covered by an employer-sponsored group health plan if the worksite closed

Potential options such as special enrollment rights, COBRA continuation coverage, individual health coverage, and health coverage through a government program in the event that an employee loses health coverage

November 2018

November was a busy month in the employee benefits world. The Internal Revenue Service (IRS) extended the due date for employers to furnish Forms 1095-C or 1095-B to individuals, extended “good faith compliance efforts” relief for 2018, and issued specifications for employer-provided substitute ACA forms. The Department of the Treasury (Treasury), Department of Labor (DOL), and Department of Health and Human Services (HHS) released two final rules on contraceptive coverage exemptions.

The IRS released indexed Patient-Centered Outcomes Research Institute (PCORI) fees and inflation-adjusted limits for various benefits. The DOL, IRS, and the Pension Benefit Guaranty Corporation (PBGC) released advance informational copies of the 2018 Form 5500 annual return/report and instructions.

For survivors of the 2018 California wildfires, the IRS provided tax relief and the DOL released employee benefit guidance. The IRS provided guidance to employers who adopt leave-based donation programs to provide charitable relief for victims of Hurricane Michael. The Treasury released its Priority Guidance Plan that lists projects that will be the focus of the Treasury and IRS for the period from July 1, 2018, through June 30, 2019.

IRS Extends Due Date to Furnish ACA Forms to Participants and Provides Good Faith Penalty Relief

The Internal Revenue Service (IRS) issued Notice 2018-94 to extend the due date to furnish 2018 Forms 1095-B and 1095-C to individuals. The due date moves from January 31, 2019, to March 4, 2019.

The IRS also extends “good faith compliance efforts” relief for 2018. As in prior years, this relief is applied only to incorrect or incomplete information reported in good faith on a statement or return. The relief does not apply to a failure to timely furnish a statement or file a return.

Treasury, DOL, and HHS Release Two Final Rules on Contraceptive Coverage Exemptions

The Department of the Treasury (Treasury), Department of Labor (DOL), and Department of Health and Human Services (HHS) (collectively, Departments) released two final rules on contraceptive coverage exemptions. These rules finalize the Departments’ interim final rules that were published on October 13, 2017. HHS also issued a press release and fact sheet on these final rules.

The first final rule provides an exemption from the contraceptive coverage mandate to entities (including certain employers) and individuals that object to services covered by the mandate on the basis of sincerely held religious beliefs.

The second final rule provides an exemption from the contraceptive coverage mandate to nonprofit organizations, small businesses, and individuals that object to services covered by the mandate on the basis of sincerely held moral convictions.

IRS Releases Indexed PCORI Fee

The Patient Protection and Affordable Care Act (ACA) imposes a fee on insurers of certain fully insured plans and plan sponsors of certain self-funded plans to help fund the Patient-Centered Outcomes Research Institute (PCORI). The PCORI fee is due by July 31 of the year following the calendar year in which the plan or policy year ends.

The Internal Revenue Service issued Notice 2018-85 to announce the PCORI fee of $2.45 for policy years and plan years that end on or after October 1, 2018, and before October 1, 2019.

IRS Releases 2019 Inflation-Adjusted Limits

The Internal Revenue Service (IRS) released its inflation-adjusted limits for various benefits. For example, the maximum contribution limit to health flexible spending arrangements (FSAs) will be $2,700 in 2019. Also, the maximum reimbursement limit in 2019 for Qualified Small Employer Health Reimbursement Arrangements will be $5,150 for single coverage and $10,450 for family coverage.

Principal Business Activity Codes.Principal Business Activity Codes have been updated to reflect updates to the North American Industry Classification System (NAICS). For Line 2d, a plan administrator would enter the six-digit Principal Business Activity Code that best describes the nature of the plan sponsor’s business from the list of codes on pages 78-80 of the Form 5500 Instructions.

Administrative Penalties. The instructions have been updated to reflect that the new maximum penalty for a plan administrator who fails or refuses to file a complete or accurate Form 5500 report has been increased to up to $2,140 a day for penalties assessed after January 2, 2018, whose associated violations occurred after November 2, 2015.

Because the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015 requires the penalty amount to be adjusted annually after the Form 5500 and its schedules, attachments, and instructions are published for filing, be sure to check for any possible required inflation adjustments of the maximum penalty amount that are published in the Federal Register after the instructions have been posted.

Form 5500-Participant Count.The instructions for Lines 5 and 6 have been enhanced to make clearer that welfare plans complete only Line 5 and elements 6a(1), 6a(2), 6b, 6c, and 6d in Line 6.

Be aware that the advance copies of the 2018 Form 5500 are for informational purposes only and cannot be used to file a 2018 Form 5500 annual return/report.

ERISA imposes the Form 5500 reporting obligation on the plan administrator. Form 5500 is normally due on the last day of the seventh month after the close of the plan year. For example, a plan administrator would file Form 5500 by July 31, 2019, for a 2018 calendar year plan.

Tax Relief for Victims of November Wildfire in California

Victims of the wildfires that took place beginning on November 8, 2018, in California may qualify for tax relief from the Internal Revenue Service (IRS). The President declared that a major disaster exists in California. The Federal Emergency Management Agency’s major declaration permits the IRS to postpone deadlines for taxpayers who have a business in certain counties within the disaster area.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866-562-5227 to request this tax relief.

Whether an employee will still be covered by an employer-sponsored group health plan if the worksite closed

Potential options such as special enrollment rights, COBRA continuation coverage, individual health coverage, and health coverage through a government program in the event that an employee loses health coverage

The DOL also acknowledged that there may be instances when full and timely compliance by group health plans may not be possible due to physical disruption to a plan’s principal place of business. The DOL’s enforcement approach will emphasize compliance assistance, including grace periods and other relief where appropriate.

IRS Provides Guidance on Leave-Based Donation Programs’ Tax Treatment

The IRS issued Notice 2018-89 to guide employers who adopt leave-based donation programs to provide charitable relief for victims of Hurricane Michael. These leave-based donation programs allow employees to forgo vacation, sick, or personal leave in exchange for cash payments that the employer will make to charitable organizations described under Internal Revenue Code Section 170(c).

The employer’s cash payments will not constitute gross income or wages of the employees if paid before January 1, 2020, to the Section 170(c) charitable organizations for the relief of victims of Hurricane Michael. Employers do not need to include these payments in Box 1, 3, or 5 of an employee’s Form W-2.

Treasury Releases 2018-19 Priority Guidance Plan

The Department of the Treasury (Treasury) released its 2018-2019 Priority Guidance Plan (Plan) that describes the priorities for the Treasury and the Internal Revenue Service (IRS) for the period from July 1, 2018, through June 30, 2019. The Plan contains a list of projects that will be the focus of the Treasury and IRS, including:

Guidance on employer shared responsibility provisions

Regulations regarding the excise tax on high cost employer-provided coverage (also known as the “Cadillac tax”).

December 2018

December was a relatively quiet month in the employee benefits world. A U.S. District Court issued an order declaring that the Patient Protection and Affordable Care Act (ACA) is unconstitutional. The Equal Employment Opportunity Commission (EEOC) issued two final rules to remove certain wellness program incentives. The Department of Labor (DOL) updated its Form M-1 filing guidance for association health plans.

U.S. District Court Declares ACA Unconstitutional

On December 14, 2018, the U.S. District Court for the Northern District of Texas (Court) issued a declaratory order in ongoing litigation regarding the individual mandate and the Patient Protection and Affordable Care Act (ACA). The Court declared that the individual mandate is unconstitutional and declared that the rest of the ACA – including its guaranteed issue and community rating provisions – is unconstitutional.

The Court did not grant the plaintiffs’ request for a nationwide injunction to prohibit the ACA’s continued implementation and enforcement. The Court’s declaratory judgment simply defines the parties’ legal relationship and rights under the case at this relatively early stage in the case.

On December 16, 2018, the Court issued an order that requires the parties to meet and discuss the case by December 21, 2018, and to jointly submit a proposed schedule for resolving the plaintiffs’ remaining claims.

On December 30, 2018, the Court issued two orders. The first order grants a stay of its December 14 order. This means that the court’s order regarding the ACA’s unconstitutionality will not take effect while it is being appealed. The second order enters the December 14 order as a final judgment so the parties may immediately appeal the order.

On December 31, 2018, the Court issued an order that stays the remainder of the case. This means that the Court will not be proceeding with the remaining claims in the case while its December 14 order is being appealed. After the appeal process is complete, the parties are to alert the Court and submit additional court documents if they want to continue with any remaining claims in the case.

At this time, the case’s status does not impact employers’ group health plans. However, employers should stay informed for the final decision in this case.

EEOC Issue Final Rules to Remove Wellness Program Incentive Limits Vacated by Court

On December 20, 2018, the Equal Employment Opportunity Commission (EEOC) issued two final rules to remove wellness program incentives.

As background, in August 2017, the U.S. District Court for the District of Columbia held that the U.S. Equal Employment Opportunity Commission (EEOC) failed to provide a reasoned explanation for its decision to allow an incentive for spousal medical history under the Genetic Information Nondiscrimination Act (GINA) rules and adopt 30 percent incentive levels for employer-sponsored wellness programs under both the Americans with Disabilities Act (ADA) rules and GINA rules.

In December 2017, the court vacated the EEOC rules under the ADA and GINA effective January 1, 2019. The EEOC issued the following two final rules in response to the court’s order.

The first rule removes the section of the wellness regulations that provided incentive limits for wellness programs regulated by the ADA. Specifically, the rule removes guidance on the extent to which employers may use incentives to encourage employees to participate in wellness programs that ask them to respond to disability-related inquiries or undergo medical examinations.

The second rule removes the section of the wellness regulations that provided incentive limits for wellness programs regulated by GINA. Specifically, the rule removes guidance that addressed the extent to which an employer may offer an inducement to an employee for the employee’s spouse to provide current health status information as part of a health risk assessment (HRA) administered in connection with an employer-sponsored wellness program.

The DOL emphasizes that all multiple employer welfare arrangements (MEWAs) that provide medical benefits, including association health plans (AHPs) that intend to begin operating under the DOL’s new AHP rule, are required to file an initial registration Form M-1 at least 30 days before any activity including, but not limited to, marketing, soliciting, providing, or offering to provide medical care benefits to employers or employees who may participate in an AHP.

*This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors

Do you offer a reference-based pricing health benefit plan? A recent survey shows an increase in self-funded plan designs that use reference-based pricing for 2019. Read this blog post to learn more.

Self-funding and reference-based pricing are hot topics with small businesses. They are so popular, in fact, that a recent survey shows an overall increase in their 2019 projection of small employer clients having a reference-based pricing health benefit plan design. Small businesses are seeing these savings, and they’re starting to explore how reference-based pricing can help them, too.

Before we get to why self-funded plan designs that use reference-based pricing are becoming more popular for small businesses, let’s review the basics.

Reference-based pricing is a methodology of calculating payment to providers for covered treatments and services using a “reasonable fee” based on a reference point. A common reference point is the Medicare fee schedule. Some self-funded health benefit plans calculate the reasonable fee as a percentage of the Medicare fee schedule to determine reimbursement for services rendered.

Bottom line: Self-funded health benefit plan designs that use reference-based pricing can allow for a great deal of flexibility with a variety of arrangements and overall cost-savings.

First, a self-funded health benefit plan design that uses referenced-based pricing can mean less expensive coverage for employees and employers.

When coupling a self-funded health benefit plan with stop-loss insurance, reference-based pricing provides an affordable way to extend coverage to employees through lower employee contributions. So, employees are happy because they’re saving money.

And employers are happy, too, because they’re allowing for more coverage to more employees. There’s a refund potential for employers if claims dollars are less than funded.There’s also a premium tax savings of around 2% since self-funded claim dollars are not subject to state health insurance premium taxes.

Moreover, self-funded health benefit plan designs that utilize reference-based pricing may also include transparency reports with aggregate health claims data and demographic information, which allow employers to better manage costs. Overall, anytime you can design a plan that’s beneficial for employees and employers, it’s a win.
Second, reference-based pricing can provide employees more flexibility when it comes to choosing a provider. Typically, an important feature of any health benefit plan design for employees is the ability to choose the provider they want. Some self-funded plan designs that use reference-based pricing give employees the chance to pick the provider that’s right for them. And, when employees are happy with their health plan, employers are usually pretty happy, too.

Finally, self-funded plan designs that use reference-based pricing can help employees become smarter healthcare consumers because of all the transparency and choice involved. When employees better understand the healthcare processes and system, costs come down for both the employee and employer. In fact, just understanding their coverage better may help employees better use their health benefit plans.

For example, using telemedicine when appropriate, establishing a relationship with a primary care doctor and using client advocacy services can all help employees better utilize their health benefit plans. In the end, employees get smarter about how they manage their care, and employers win with reduced costs.

These factors are driving more small businesses to consider reference-based pricing self-funded health benefit plan designs with stop-loss insurance. And, for good reason. These plan designs can give employers the opportunity to offer their employees affordable health benefits, provide more choice in their health plans and providers, and encourage more employee engagement. While moving to reference-based pricing may be too big of a leap for some employers, self-funding continues to provide a means for employers to offer comprehensive major medical health benefits at lower costs.

Are you paying insurance premiums for dependents who are ineligible for your company health plan? Almost 10 percent of enrolled dependents are ineligible for the programs they are enrolled in. Read on to learn more.

Are you paying insurance premiums for people who aren’t qualified to be on your company plan?

For some employers, too often the answer is “yes.”

In our experience, we find that nearly 10% of dependents enrolled in employee health and welfare plans are not eligible to be in the program. And for a company with a couple of hundred employees that spends around $2 million a year on benefits, ineligible dependents can become a significant financial issue.

When employers pay for ineligible dependents, costs increase for them and employees. Unfortunately, it’s an all-too-common issue that employers need a solid strategy to combat.

So how do ineligible dependents get enrolled in the first place? There are a couple of common ways that employers end up paying health insurance premiums for ineligible dependents. The most basic factor is a change in a person’s situation — children pass the age of 26, spouses get jobs, people get divorced, etc. — and the employee is unaware of the need to notify the plan sponsor. Most often, these situations arise because the employer doesn’t have a process in place.

But some situations are more nefarious: An employee mischaracterizes someone as a dependent. They may claim that a nephew is a son, or that they’re still married to an ex-spouse. In either of these situations, the employer loses.

Prevent ineligible dependents with best practices

Prevent paying for ineligible dependents by putting into place best practices that begin when a new employee joins the company.

During onboarding, investigate each potential plan member when the employee applies for insurance coverage. That means seeking documentation — such as marriage certificates and birth certificates — to verify that a person is, in fact, married, or that their kids are their kids and not someone else’s. Following these processes at the outset prevents the awkwardness of having to question employees about their various family relationships. Nobody wants to ask a colleague if the divorce is final yet.

To make it easy for employees to verify everyone’s eligibility, provide access to a portal where they can upload scans or images of relevant documents. This will also make it easier to track—and keep track of—onboarding documents and dependent audits when the time comes.

Once this best practice is established, it’s important to conduct periodic dependent eligibility audits, as required by ERISA. The employer can conduct an audit or hire an external auditor. This decision is usually driven by the size of the workforce.

The most logical time to conduct an audit is during benefit enrollment. Employees are already considering options for the next plan year, and they likely won’t be confused by the need to submit verifying documents. (During this exercise, it’s also a good idea to ask plan participants to verify beneficiaries on employer-provided life insurance.)

Some employers — again, depending on the size of the workforce — will conduct random sample audits of 20-25% of their employee population. Obviously, the larger the sample size, the better. Benefits administration platforms typically streamline this process.

What happens when employers identify an ineligible dependent?

Many employers offer workers an amnesty period during which an employee can come forward to say they have someone that should be taken off the plan. If the plan sponsor identifies an ineligible dependent, employees are typically offered a one-time pass. Then, they must sign an affidavit attesting that they can be terminated if it happens again.

If the employer has processed insurance claims for an ineligible dependent, they can declare fraud and seek back payment of claims payouts. Again, most in this situation prefer a more benevolent approach and will ask the employee to make monthly differential payments until the account is even. Conducting regular dependent eligibility audits as part of the benefits administration process needs to be handled with finesse for the good of organizational culture.

Some employers may shy away from conducting audits out of concern for creating awkward situations. But frankly, it’s the plan sponsor’s job to help them navigate the waters, educate them and keep them engaged in the process by becoming their best advocates. This will not only help enhance the efficiency and accuracy of employee benefit offerings, but it will result in a smoother ride for everyone involved.

Ensuring that a health and welfare benefits program follows eligibility best practices is the responsibility of the plan sponsor. But employees have a share in that responsibility, too.

Are you searching for a detailed look at health care costs across all available health care plans? Fortunately, we have a survey that will help you gain this outlook. In this article, our partner, UBA Benefits, provides insight on the rise of health care costs and which health care plans are the most popular (costly or not).

The findings of our 2017 Health Plan Survey show a continuation of steady trends and some surprises. It’s no surprise, however, that costs continue to rise. The average annual health plan cost per employee for all plan types is $9,934, an increase from 2016, when the average cost was $9,727. There are significant cost differences when you look at the data by plan type.

Cost Detail by Plan Type

PPOs continue to cost more than the average plan, but despite this, PPOs still dominate the market in terms of plan distribution and employee enrollment. PPOs have seen an increase in total premiums for single coverage of 4.5% and for family coverage of 2.2% in 2017 alone.

HMOs have the lowest total annual cost at $8,877, as compared to the total cost of a PPO of $10,311. Conversely, CDHP plan costs have risen 2.2% from last year. However, CDHP prevalence and enrollment continues to grow in most regions, indicating interest among both employers and employees.

More than half (54.8%) of all employers offer one health plan to employees, while 28.2% offer two plan options, and 17.1% offer three or more options. The percentage of employers now offering three or more plans decreased slightly in 2017, but still maintains an overall increase in the last five years as employers are working to offer expanded choices to employees either through private exchange solutions or by simply adding high, medium-, and low-cost options; a trend UBA Partners believe will continue. Not only do employees get more options, but employers also can introduce lower-cost plans that may attract enrollment, lower their costs, and meet ACA affordability requirements.

What's the latest on the effects of President Trump's executive order on health care? We pulled this article from Kaiser Health News, which includes multiple sources for information. Check them out and stay up-to-date with us!

Kaiser Family Foundation (10 October 2017). "High-Performing ACA Navigators Mystified By Deep Cuts Less Than Year After Being Touted As ‘Superstars’" [Web Blog Post]. Retrieved from address https://khn.org/morning-breakout/high-performing-aca-navigators-mystified-by-deep-cuts-less-than-year-after-being-touted-as-superstars/

“We have yet to receive any explanation of the cut. We have met or exceeded every one of our performance metrics. There was never any feedback that gave us any indication that we were not going to receive the same amount,” says Lisa Hamler-Fugitt, the executive director of the Ohio Association of Foodbanks. The Trump administration slashed funding for theses navigators by more than 40 percent nationally, with some places seeing cuts of nearly 90 percent.

The New York Times: Trump’s Cuts To Health Law Enrollment Efforts Are Hitting Hard
Michigan Consumers for Health Care, a nonprofit group, has enrolled thousands of people in health insurance under the Affordable Care Act and was honored last year as one of the nation’s top performers — a “super navigator” that would serve as a mentor to enrollment counselors in other states. So the group was stunned to learn from the Trump administration that its funds for assisting consumers ahead of the open enrollment period that begins Nov. 1 would be cut by 89 percent, to $129,900, from $1.2 million. (Pear, 10/9)Meanwhile, in other health law news —The Hill: Trump Could Make Waves With Health Care Order
President Trump's planned executive order on ObamaCare is worrying supporters of the law and insurers, who fear it could undermine the stability of ObamaCare. Trump’s order, expected as soon as this week, would allow small businesses or other groups of people to band together to buy health insurance. Some fear that these Association Health Plans (AHPs) would not be subject to the same rules as ObamaCare plans, including those that protect people with pre-existing conditions. (Sullivan, 10/10)Marketplace: Is The Trump Administration Aiming For A “Synthetic Repeal” Of Obamcare?
For the time being at least, Congress is not going to repeal Obamacare. But President Trump knows there's a lot he can do on his own. There are reports that he’s going to issue an executive order this week, making it easier for insurers to sidestep ACA regulations and sell more bare bones, cheaper plans to healthier consumers. (Gorenstein, 10/9)Boston Globe: A Look Back At All The Recent Failed GOP Attempts At Repealing Obamacare
On Tuesday afternoon, Senate Republicans said they would not bring the latest attempt to repeal Obamacare to a vote, citing a lack of support among GOP senators. Here’s a look at all the other times the party’s attempts came to a standstill under President Trump. (Reiss, 10/10)Politico: Republicans Privately Admit Defeat On Obamacare Repeal
For the first time, rank-and-file Republicans are acknowledging Obamacare may never be repealed. After multiple failures to repeal the law, the White House and many GOP lawmakers are publicly promising to try again in early 2018. But privately, both House and Senate Republicans acknowledge they may never be able to deliver on their seven-year vow to scrap the law. (Haberkorn, 10/9)You can read the original article here.Source:Kaiser Family Foundation (10 October 2017). "High-Performing ACA Navigators Mystified By Deep Cuts Less Than Year After Being Touted As ‘Superstars’" [Web Blog Post]. Retrieved from address https://khn.org/morning-breakout/high-performing-aca-navigators-mystified-by-deep-cuts-less-than-year-after-being-touted-as-superstars/

Great article from our partner, United Benefit Advisors (UBA) by Danielle Capilla.

Earlier this month, the Department of Labor (DOL) provided an informational FAQ relating to the Mental Health Parity and Addiction Equity Act (MHPAEA) and the 21st Century Cures Act (Cures Act). This is the DOL's 38th FAQ on implementing the Patient Protection and Affordable Care Act (ACA) provisions and related regulations. The DOL is requesting comments on a draft model form for participants to use to request information regarding nonquantitative treatment limitations, and confirms that benefits for eating disorders must comply with the MHPAEA. Comments are due by September 13, 2017.

The MHPAEA amended various laws and regulations to provide increased parity between mental health and substance use disorder benefits and medical/surgical benefits. Generally, financial requirements such as coinsurance and copays and treatment limitations for mental health and substance use disorder benefits cannot be more restrictive than requirements for medical and surgical benefits. Regulations also provide that a plan or issuer may not impose a nonquantitative treatment limitation (NQTL) unless it is comparable and no more stringent than limitations on medical and surgical benefits in the same classification.

On December 13, 2016, President Obama signed the 21st Century Cures Act into law. The Cures Act has numerous components including directing the Secretary of Health and Human Services, Secretary of Labor, and Secretary of the Treasury (collectively, the Agencies) to issue compliance program guidance, share findings with each other, and issue guidance to group health plans and health insurance issuers to help them comply with the mental health parity rules.

The Agencies must issue guidance to group health plans and health insurance issuers; the guidance must provide information and methods that plans and issuers can use when they are required to disclose information to participants, beneficiaries, contracting providers, or authorized representatives to ensure the plans' and issuers' compliance with the mental health parity rules.

The Agencies must issue the compliance program guidance and guidance to group health plans and health plan issuers within 12 months after the date that the Helping Families in Mental Health Crisis Reform Act of 2016 was enacted, or by December 13, 2017.

In the June 2017 FAQ, the DOL reiterated its request for comments on the following questions, originally asked in the fall of 2016:

Whether issuance of model forms that could be used by participants and their representatives to request information with respect to various NQTLs would be helpful and, if so, what content the model forms should include. For example, is there a specific list of documents, relating to specific NQTLs, that a participant or his or her representative should request?

Do different types of NQTLs require different model forms? For example, should there be separate model forms for specific information about medical necessity criteria, fail-first policies, formulary design, or the plan's method for determining usual, customary, or reasonable charges? Should there be a separate model form for plan participants and other individuals to request the plan's analysis of its MHPAEA compliance?

Whether issuance of model forms that could be used by States as part of their review would be helpful and, if so, what content the model form should include. For example, what specific content should the form include to assist the States in determining compliance with the NQTL standards? Should the form focus on specific classifications or categories of services? Should the form request information on particular NQTLs?

What other steps can the Departments take to improve the scope and quality of disclosures or simplify or otherwise improve processes for requesting disclosures under existing law in connection with mental health/substance misuse disorder MH/SUD benefits?

Are there specific steps that could be taken to improve State market conduct examinations and/or Federal oversight of compliance by plans and issuers?

The DOL is also asking for input on a draft model form that participants, enrollees, or representatives could use to request information from their health plan or issuer regarding NQTLs that may affect their MH/SUD benefits.

The Cures Act also requires that benefits for eating disorders be consistent with the requirements of MHPAEA. The DOL clarified that the MHPAEA applies to any benefits a plan or issuer may offer for treatment of an eating disorder.

Are your employees having a hard time understanding all the benefits that are offered to them? Take a look at this article by Katie Kuehner-Hebert from Benefits Pro and find out the major questions that most employees seem to have about their employee benefits.

Employers have a conundrum: One-fifth of workers regret the health care benefit choices they make, but the same percentage of workers also concede they ignore any written educational materials about benefits their employers provided.

To make matters worse, according to Jellyvision’s 2017 ALEX Benefits Communication Survey, two-thirds don’t like in-person consultations -- not even if it’s within a group or one-on-one with a benefits expert.

So what’s an employer to do?

“The challenge is most people don’t want ‘education’ on these topics,” says Jellyvision chief executive Amanda Lannert. “No one wakes up with a burning desire to learn about HDHPs. In our experience, people respond best to plain-English communication that feels like they’re talking about benefits with a friend -- if benefits were a thing friends ever talked about.”

The good news is 82 percent of the 2,043 U.S. adults surveyed by Harris Poll say they’re satisfied with their employer’s benefits communication, and 86 percent feel their company has provided them with enough information to make informed decisions. A majority (69 percent) say they personally have spent either “a great deal” or “a lot” of time learning about their company’s benefits offerings.

However, while 89 percent say they generally understand their benefit options, more than a few aren’t too sure about all of the details.

For example, only 59 percent are correct in identifying the full cost of their health care plan, including their contribution and their employer’s contribution, and half (50 percent) say they are not knowledgeable about high-deductible health plans. More than half (54 percent) are unsure whether they can make changes to their insurance during qualified life events, and 43 percent are unclear on where to direct their health insurance questions.

“We think the number one biggest take-away of this entire survey is… employees want your help when choosing their health plans,” the authors write.

Indeed, more than half (55 percent) of all employees whose company offers health insurance say they would like help from their employer when choosing a health plan. Roughly half (49 percent) say the decision-making process is very stressful, and 36 percent feel the open enrollment process at their company is extremely confusing.

Jellyvision’s survey asked respondents to react to a possible repeal of the Affordable Care Act, particularly as it relates to employer-provided health insurance plans, and found a majority (61 percent) don’t think a repeal would affect them personally.

When asked about keeping certain provisions of the ACA, 80 percent say it’s “absolutely essential” or “very important” to keep coverage of preexisting conditions, 78 percent say that about free preventative care, and 67 percent say that about coverage of adult children up to age 26.